News Corp. Threatens to Make Fox Cable-Only Amid Aereo Dispute

Comments made in NAB keynote speech

Updated: 6:11 p.m. PDT

LAS VEGAS–News Corp. president and COO ChaseCarey told the opening gathering at the NAB Show Monday that if Fox does not prevail in the Aereo case, it will consider turning its network into a subscription service.

“Aereo is stealing our signal,” Carey said in his keynote conversation with NAB topper Gordon Smith. “We believe in our legal rights, we’re going to pursue those legal rights fully and completely, and we believe we’ll prevail. But we want to be clear. If we can’t have our rights properly protected through legal and political avenues, we will pursue business solutions. One such business solution would be to take the network and turn it into a subscription service.”

Carey added, ” It’s not a path we’d love to pursue. But we’re not going to sit idly by and let people steal our content.”

The comments represented a dramatic ratcheting up of the rhetoric regarding the already heated legal standoff between Aereo and the broadcast networks suing them. Last week, a federal appellate court refused to block Aereo from delivering TV streams over the Internet.

“Simply put, we believe that Aereo is pirating broadcasters’ content. As Chase Carey said, no broadcaster can afford to sit idly by and allow Aereo’s theft to continue unchecked. To serve our community, we need to protect our product and revenue streams and therefore we too are considering all of our options — including converting to pay TV. With Hispanics watching over-the-air news and entertainment at twice the rate of non-Hispanics, being forced to convert to cable would significantly impact this community.”

Carey dropped his bombshell during a discussion of the importance of the dual revenue stream model — advertising and retransmission fees — to the broadcasting industry.

“In a broader sense, piracy as a whole is an enormous inhibition for us. We believe in the broadcasting business but the broadcasting business has to be one that enables us to be fairly compensated by parties that want to redistribute our programming. Part of that pact is we’ll continue to make our free over the air signal available to homes that want to directly access that signal themselves. We need the dual revenue stream. Subscriptions and advertising are critical for broadcasting to be viable.”

Carey added that the types of “big event television” in news, sports and entertainment that Fox and other broadcast networks focus on “simply isn’t sustainable in an ad-supported-only model.”

In a statement released moments after his onstage appearance, Carey elaborated: “We have no choice but to develop business solutions that ensure we continue to remain in the driver’s seat of our own destiny. One option could be converting the Fox broadcast network to a pay channel, which we would do in collaboration with both our content partners and affiliates.”

Onstage, Carey rejected suggestions that the current system for negotiating retransmission fees needs to be changed by the federal government. “I think it’s pretty clear that you have certain entities trying to essentially negotiate through Washington,” he said. “It doesn’t need to be fixed. All you’re trying to do is negotiate a fair price for the content we have. It’s the same thing we’ve done for decades with cable channels.

“What we broadcasters receive for retransmission is woefully undervalued compared with any cable channel out there. We’ve been very constructive in trying to be fair. … We have the best programming, we need to be fairly compensated. It’s as simple as that.”

Carey also addressed the creation of the Fox Sports 1 national cable sports network. “Sports for News Corp. as a whole has as big a driving force as any for our business,” he said. “We actually believe that sports is a uniquely important type of content. It’s the ultimate big-event TV. It is content at the forefront of what these new technologies take advantage of and deliver on. I think it’s going to continue to be the locomotive that continues to drive a lot of the television experience.”

He said the network isn’t trying to compete with ESPN yet: “We’re looking to build a profitable business first. ESPN’s in a different place.”

He said many of the deals Fox has made for its regional networks would not have been viable without plans to share content among the cable and broadcast networks, with the broadcast network home for the biggest events.

The NAB Show Opening was sparsely attended compared with previous years, perhaps due to showers in Las Vegas. NAB topper Gordon Smith repeated his refrain about the reliability of broadcasting compared with streaming media. “Our competitors in the wireless industry want to be part of this endeavor. But our competitors will never have what we have: the ability to deliver our high quality content reliably.”

But Smith, who has tended to be skeptical about change in the broadcasting industry, touted future tech for both television and radio, suggesting that the TV industry consider moving to a new standard. (The Advanced Television Systems Committee already working on a next-gen TV standard to accommodate Ultra-HD and other advanced TV tech.) He also envisioned an interactive radio system combining online and live content, saying it would be important to ward off the threat that radios might no longer be included in cars.

“Broadcasters can’t take their place in the dashboard for granted,” said Smith. “We must continue to innovate and provide the content listeners want on many different platforms.”

Nevada Rep. Dana Titus, D-Nev., welcomed the gathering, held in the Paradise Room of the LVH Hotel. Following Smith’s remarks, Gregory Walden, R-Ore., a former broadcaster himself, called for a more cooperative relationship between the FCC and the broadcast industry.

Accepting the NAB’s Distinguished Service Award, veteran CBS newsman Bob Schieffer called on broadcasters to assume some of the role that newspapers have traditionally filled in their local markets. “Unless there is some entity that does in the 21st century what newspapers did for most of the 20th century, that is, keep an eye on government, we’re going to experience corruption as never before,” he said. “And let me tell you this, you cannot have a democracy if you don’t have that independent version of events that people can compare to the government’s version.”